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Starlight: A Layer 2 Payment Channel Protocol for Stellar - SDF Blog

Stellar has scaled well since the network’s launch in 2014 while maintaining fast and safe finality guarantees. However, at SDF, we’re building for a future where everybody around the globe has equitable access to financial services. We’re targeting a scale that goes beyond what blockchain has demonstrated is possible today while maintaining fast and safe finality.

To that end, we’re exploring Layer 2 solutions. We’re taking a look at solutions the blockchain industry has proven to work and are well-suited to enterprises who might build on Stellar. This led us to experiment with payment channels on Stellar. Payment channels are a category of Layer 2 protocols supporting fast payments between two participants, and we’ve demonstrated that we can also use them for high-throughput payments – 1+ million payments per second – between two users.‍

Starlight is a Layer 2 protocol that defines a bi-directional half-duplex payment channel. At SDF, we’ve evolved the concepts in the previous version of Starlight (prototyped by Interstellar) to make use of new capabilities introduced by recent protocol upgrades (CAP-15, CAP-33) as well as new proposals in review (CAP-21, CAP-40). 

Three concepts make the mechanisms that power Starlight succinct, lightweight, and efficient.

1. Transaction Preconditions

CAP-21 adds a suite of new preconditions that can be added to transactions. Preconditions are conditions that must be satisfied for a transaction to be valid. An example of a well-known precondition is transaction time bounds: a transaction needs to be submitted during its time bounds. CAP-21 adds ledger bounds, minimum sequence number, extra signers, as well as the ability to create relative time locks.

Starlight uses the minimum sequence number precondition so that groups of transactions can skip sequence numbers on accounts. This means Starlight clients only need to hold on to the last agreement. There’s no need to store or revoke old ag...

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